Space Oddity Becomes a Super Nova for Investors

By Stephen Bell

Fund managers who track the S&P/ASX 200 are toasting returns of around 15% in 2012. But these gains are dwarfed by those of early investors in Sirius Resources Ltd.—a company that owes its success in large part to one man’s hunt for wreckage from a NASA space station that crashed to Earth in the Australian Outback in 1979.

Sirius Resources was worth just 8 million Australian dollars (US$8.3 million) when it announced a major discovery of nickel at its Nova prospect in Western Australia state in late July, but is set to end the year with a value around A$460 million. That’s more than producing resources companies like Gindalbie Metals Ltd. and BC Iron Ltd.

How the Nova prospect was located is a throwback to the days when prospectors headed into the Outback with little more than a shovel, a compass and a map.

In 1979, Mark Creasy drove deep into the interior to collect debris from the empty Skylab space station, which was partly strewn across Western Australia state instead of falling entirely into the Indian Ocean as NASA had hoped.

Skylab – first launched into Earth’s orbit on a rocket six years earlier – had played a central role in proving that humans could work in space for an extended periods. Three-man crews had occupied the Skylab workshop for more than 170 days while in orbit.

Mr. Creasy found only two nitrogen tanks from the Skylab station on his trip. His hopes of striking it rich by selling them to space enthusiasts and collectors were quickly disappointed, and he still has them at home in Perth.

“The worldwide furor only lasted a short time and by the time we found (the tanks) and then went out to sell, the world had lost interest in what proved to be a nine-day wonder,” Mr. Creasy, 67, told Deal Journal Australia.

However, Mr. Creasy discovered something else that day that proved far more exciting. In studying detailed maps of the debris track, he unearthed a vital nugget of information: U.S. resources giant Newmont Mining had struck nickel and copper in the remote Fraser Range region in the early 1970s.

Mr. Creasy remembered this obscure fact two decades later when nickel prices soared and staked out Fraser Range for himself.

Three years ago, he gave up control of the Fraser Range tenements that included the Nova prospect in a deal with ASX-listed explorer Sirius Resources. But rather than cash out entirely, Mr. Creasy backed his hunch of mineral riches beneath the surface by taking more than a 25% stake in the company.

The bet has paid off handsomely. Mr. Creasy’s stake in Sirius means he is sitting on a paper profit of more than A$100 million on his original investment. In addition, Mr. Creasy retains a direct 30% stake in the Nova prospect, which has also increased sharply in value.

“I’m a gambler,” said Mr. Creasy, whose earliest prospecting success came from panning for gold in rivers or using metal detectors. “Some people always seek security, want to play it safe and take a profit. I have never done that in my entire existence.”

Mr. Creasy is among a long line of Australians whose successful bets on resources have catapulted them among the country’s wealthy elite. Gina Rinehart is ranked by Forbes as the world’s 29th richest person with an $18 billion fortune, largely built from iron ore mines and resources deposits in the Outback. Another Western Australian – Andrew ‘Twiggy’ Forrest – built Fortescue Metals Group from a tiny explorer into the world’s fourth-largest iron ore producer in a decade.

Mr. Creasy’s first big discovery – a gold deposit known as Bronzewing – sold for A$117 million in 1991 and earned him an entry in the Guinness Book of Records for the highest payout to a prospector at that time. It also won him the accolade of ‘Prospector of the Year’ from his peers. However, not every bet has come in– he was a major shareholder of gold miner Croesus Mining when it collapsed into administration in 2006.

“I’m sure that Mark, like any other shareholder, would sell out at the right price,” said Mark Bennett, Sirius Resources’s Chief Executive. But the right price is “way beyond where we are at the moment.”

Earlier this month, Sirius Resources raised A$44 million through a share placement to fast-track development of the Nova deposit. Hartleys acted as a broker on the placement.

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Deal Journal Australia is an up-to-the-minute take on the deals and deal makers that shape the Australian landscape, including mergers and acquisitions, capital raisings, private equity and debt markets. In short, wherever money changes hands. Deal Journal Australia is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s Gillian Tan is the lead writer, with contributions from other Journal and Dow Jones reporters and editors. Send news items, comments and questions to gillian.tan@wsj.com.

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